Microsoft lost $400 million on the Xbox One… Not Quite [UPDATED]

The games industry is a swirling maelstrom of money. When someone makes gains another almost always makes losses. It isn’t outside the realms of possibility to assume that the release of a new, highly anticipated Xbox One console would lead to a spike in profits for Microsoft. This however may not be the case, as Microsoft’s 10K filing (which opens in a word doc) may have just revealed.

Starting with the good news, during 2013/14 the form states “Xbox Platform revenue increased $1.7 billion or 34%, due mainly to sales of Xbox One”. So that’s good right? An increase in revenue means profits must be higher. Well, no. While revenue is always something good to see rising, there’s always a cost associated with any sale.

A $1.7 billion revenue increase is nothing short of brain-melting. What really gets the grey matter pouring from your ears though is the cost associated. Microsoft reports that the “Xbox Platform cost of revenue increased $2.1 billion or 72%, due mainly to higher volumes of consoles sold and higher costs associated with Xbox One”.

Using some rough maths that looks as though it means the Xbox division of Microsoft’s operations look to have lost $400 million during the last financial year. The news may actually be worse for Microsoft that it first appears though, because these are all gross revenues and costs. This means they don’t take into account other operating costs, possibly leading to the Xbox One costing Microsoft even more than these already dire figures show.

This is however incorrect.

While yes those two figures as they stand do make it look as though the company’s division lost $400 million, they actually were able to turn a profit overall of over $850 million dollars with further investigation of the file linked above. These are simply the changes in revenue so yes, while costs did increase by a smaller fraction than revenue taken, there is still an overall profit big enough to make anyone smile.

Just because there is an increase in costs which does not necessarily match the increases seen in revenue, that does not mean that there has been an overall loss.

This is all to be expected from a new consoles launch. After all bringing a new home console to the world is incredibly expensive, especially when you factor in the manufacturing process and organizing transit networks. When